Thursday, August 20, 2009

Sucking the RENT out of RET

The capacity of the Australian Parliament to bastardise good policy and turn it into a feeding trough for rentseekers and other parasites is truly remarkable.

You can't move in this place or open a paper without the bottom-feeding filth of the political economy springing out, hands extended, threatening disaster unless they can fasten tightly onto the public teat. And it's getting worse, as more and more sectors heed the example of lowlifes like the Minerals Council of Australia and come in for their chop.

The Coalition and the Government managed a deal yesterday on the Renewable Energy Target, or what's left of it. Just in the nick of time before a Question Time in which the Government would assuredly have contrasted its success in facilitating the Gorgon deal with the inability of the Coalition to even agree amongst themselves on a bill they had committed to support.

In the event, Western Australian backbenchers -- Mal Washer and Judi Moylan honourably excepted -- found another way to ruin Malcolm Turnbull's afternoon, but the Coalition demonstrating it is a rabble is now so common as to no longer be newsworthy.

Bear in mind that the RET is a dud idea improved only by the fact that the Government's ETS is even worse. As Ross Garnaut noted, a renewable energy target should be wholly unnecessary and in fact counter-productive if you have a proper emissions trading scheme that will allow the market to effectively respond to the price of carbon emissions.

But now that's the counterfactual. The Government's ETS will be almost completely ineffectual (and may be rendered entirely ineffectual in negotiations between the Government and Opposition over the next couple of months) and that means the RET is now the only game in town in terms of driving any sort of move to a lower-carbon economy.

It already had flaws, like the bizarre solar multiplier component, in which solar panel power will generate five times more credits than it should generate, artificially bumping up the scheme.

But the RET, like the Government's emissions trading scheme, has been further degraded by rentseekers and whingeing industries demanding a free kick. As Lenore Taylor notes this morning in a great little piece, the industries eligible for "interim assistance" under the RET bill were initially only a small number with an electricity intensity above a certain threshold of megawatt-hours per $million revenue. That, as the Government's own explanatory memorandum made clear, was expected to include only the aluminium smelting, silicon production and newsprint manufacturing sectors.

Well, scratch that, because under the deal with the Coalition everyone who is getting a handout of free CPRS permits will now be getting assistance under the RET bill, at the same thresholds, for the cost of Renewable Energy Certificates. And if the price of price of RECs goes above $40, there'll be additional assistance for big electricity users for complying not just with the RET but with the current renewable energy target of 5%. At least the CPRS debacle hasn't yet led to the softening of existing greenhouse reduction schemes.

Now, bear in mind that those big electricity users are going to enjoy a fall in the cost of wholesale electricity as a consequence of the RET, because it will bring renewable energy sources online that big users won't have to pay for, increasing overall generation capacity. That will go straight onto the bottom line of big electricity users, at everyone else's expense.

Despite this, the aluminium industry, taking its cue from the Minerals Council on the CPRS, is still whingeing about the RET and demanding even more assistance.

And in a sop to the Nationals, the "food processing industry" will get a special review by the Productivity Commission to consider the impact of the RET on it -- along with any other sector the Government decides has made a case for exemption. The "food processing industry" is a fiction and in fact is an agglomeration of otherwise unrelated food, drink and even pharmaceutical producers and manufacturers. And we all know the likes of Coca-Cola and the fast food industry need more help from governments.

You'll recall that at the start of this week, the Australian Food and Grocery Council -- i.e.Coles and Woolies -- tried to whip up a scare campaign over the impact of the CPRS on food prices, using the regular Big Retail mouthpiece, Glenn Milne. Council chief Kate Carnell, showing the political smarts she demonstrated during her reign in the ACT which produced an unused futsal slab, grass painted green and a dead child, waited until after the CPRS bill had been defeated to raise the issue, and then couldn't actually produce the "modelling" she reckoned formed the basis of the Council's claims. Still, early days for the Council -- eventually they'll be rentseeking with the best of them.

There are a number of reasons why we now have a political system apparently structured to reward the basest instincts of our business sector. The proliferation of lobbyists -- frequently former politicians and staffers -- is one. The rise of economics consultancies who will "model" any outcome clients want -- and the unwillingness or inability of journalists to call bullsh-t on such modelling -- is another. The finely-balanced nature of the Senate also plays a role, especially when unpredictable dropkicks like Steve Fielding hold a swing vote. But ultimately it's because we don't have politicians -- on either side, but this is primarily a fault of the Government -- apparently capable of resisting rentseeking. At least John Howard knew a try-on when he saw one, and refused to let the GST be ruined by concessions until he absolutely had to when confronted with Meg Lees. Paul Keating sent rentseekers of any kind away with a black eye and a warning not to come back. Bob Hawke was adept at crafting outcomes that looked after those genuinely affected by reforms without undermining what he was trying to achieve.

Oh for a small part, just a lousy bloody fraction, of that sort of political courage now.